ECB economist voices caution over eurozone reforms

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European Central Bank chief economist Juergen Stark voiced caution on Wednesday over whether European governments have taken landmark steps to ensure effective budgetary discipline.

A European Union agreement unveiled on Tuesday would make it easier to sanction EU states which blow their budgets and create a permanent, Greek-style safety net for those which cannot cope.

This "was celebrated as a great day for Europe," Stark said on the sidelines of an ECB conference in Frankfurt.

But it "remains to be seen whether this will be a great day and whether in the end the strengthening of the fiscal rules, the strengthening of the Stability and Growth Pact and the new procedure on macro economic surveillance will really turn out to be a quantum leap," the ECB economist added.

ECB president Jean-Claude Trichet has called several times for European governments to make a "quantum leap" in governance and budgetary responsibility in particular to respect terms of the widely-flouted pact.

European Union president Herman Van Rompuy said on Tuesday that the decisions amounted to the eurozone's "biggest reform" since its creation in 1999, highlighting a new "early-warning system" that will detect "real estate bubbles" such as those that exacerbated recession in Spain or Ireland.

Stark noted however that "no final decision has been taken yet" at the highest EU level and said ECB officials were waiting to see the final accord.

"I don't know the details in the document yet which will be put forward to the European Council next week," he said.

© 2010 AFP

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